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Cloud IT Economics: What you don't know about TCO can hurt you

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An e-book that explores factors beyond basic price that impact the true cost of ownership for cloud implementations by comparing and contrasting prevalent approaches, using common enterprise workloads, from three prominent cloud service providers.

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Cloud IT Economics: What you don't know about TCO can hurt you

  1. 1. Cloud IT economics What you don’t know about TCO can hurt you
  2. 2. Cloud is evolving, becoming the key platform for innovation and business value. Yet, as enterprises look to the cloud to accelerate growth, many still struggle to understand the true cost of ownership. Enterprises turn to the cloud to… What do they hope to gain? Achieve deployment flexibility... ...to gain interoperability across hybrid environments ...to leverage emerging ecosystems and communities Improve quality and speed time-to-market... ...to roll out innovative business models  quickly ...to deliver compelling customer experiences Leverage existing investments... ...to integrate cloud with current IT infrastructure and applications ...to deliver an integrated user experience Quickly gain deeper insight from data... ...to drive real-time decision making using data from internal and external sources ...to increase productivity, collaboration and quality of customer relationships Achieve greater understanding and learning... ...to identify new business value from “dark” data ...to improve customer targeting and personalization Innovation to maximize opportunity and business flexibility Speed to get to value faster Insight to get the best business outcomes Security to minimize risk Flexibility to best deliver on business objectives Access to technology without major capital investment Transformation to deploy new business models Choice to get the best price-performance Cost to optimize IT spending Visibility and control to manage the cloud more efficiently To seize the advantage that cloud promises, ­forward-thinking business leaders are looking for solutions that enable strategic capabilities at the lowest cost. And providers are responding, with aggressive pricing that makes their cloud offerings look very affordable. But are they? To get an accurate understanding of cloud costs and their business impact, it’s necessary to look at real-world costs and performance. This guide can help you in your comparison and evaluation of competitive cloud offerings. Using what’s here, you can look beyond initial pricing to focus on real-world performance, price-­ performance and the many considerations that drive total cost of ownership.
  3. 3. 3Cloud IT economics What you don’t know about TCO can hurt you In the real world, cost of ownership is not that simple “ Some businesses that chose a cloud service provider based on low published rates are experiencing higher costs than anticipated. Others are fielding complaints about unacceptable application performance. Still others are realizing they have no idea whether they are paying too much or too little for what they are getting.” – Frost & Sullivan, The Truth About Cloud Price-Performance1 The total cost is not always evident Determining the true cost of cloud is more complex than it might seem. By focusing on initial pricing, enterprises may miss important performance factors and service add-ons that increase overall cost. An attractive base price is far less appealing when additional investment is needed to accelerate business results. The real cost of a cloud that speeds innovation, enables compelling customer experiences and supports business flexibility is the more meaning- ful measure. There’s an important difference between total cost of acquisition (TCA) and total cost of ownership (TCO). The first is what the enterprise actually pays for cloud services. TCO is harder to pin down because it also includes intangible costs like complexity that drives up IT staffing costs, or poor performance that impacts customer experiences. Answering the total cost question takes a deep understanding of how the cloud affects the enterprise, and exactly what’s being purchased. That’s why there’s more to making a smart cloud decision than choosing the lowest entry price. When looking at cloud you might ask yourself: What capabilities will accelerate speed, innovation and business results? __ What are the real requirements for applications, workloads, and service levels? __ Can the cloud integrate well with conventional IT, today and in the future? __ Can the provider meet your requirements for security and compliance? What level of performance is needed to drive compelling customer experiences? __ Can the provider’s cloud deliver the speed and throughput that individual workloads require? __ Are choices available that deliver higher levels of performance and service? What are the real economics of the solution? __ How much will it cost to achieve the needed ­performance– initially, and in the future? __ If upgrades are needed, what will they cost? __ How much does it cost to migrate workloads and data? __ Are there hidden costs?
  4. 4. What are some of the factors that drive total costs? Technology __ Processor and RAM costs __ Storage and memory costs __ Connectivity and bandwidth costs __ Upgrades and scalability to meet high workload demands Data centers __ Number and geographic location __ Transfer charges between data centers Software and operating environment __ Operating system costs and associated overhead __ Software licensing Technical support __ Cost of internal resources to support the environment __ Provider technical support Management __ Visibility, control and transparency __ Complexity Development __ Workload deployment efficiency __ Platform complexity Integration and workload portability __ Ability to integrate current and future applications __ Interoperability among systems
  5. 5. 5 It’s time to think differently about cost “ Selecting a cloud service requires an in-depth understanding of workload performance characteristics and needs, and the ability to match those needs to the actual offerings of multiple cloud vendors.” – Frost & Sullivan, The Truth About Cloud Price-Performance2 In cost of ownership, details make the difference What might seem the least expensive cloud offering could cost more in the end because it doesn’t deliver the performance or capabilities that the enterprise actually needs “out of the box.” The key cost-related question is how well the cloud performs in the context of real workloads and business requirements. It’s not just price, but price-­performance that matters–and comparisons should take every cost driver into account. The challenge with assessing the true cost of cloud is that providers don’t structure, price, or measure performance consistently. The full picture involves much more than selecting CPU, storage and networking. Similar specifications from different providers can result in very different levels of performance and cost, and it can be next to impossible to make direct comparisons on paper. To make an accurate comparison it’s necessary to look at key performance metrics, infrastructure configurations, contractual agreements and the impact of workloads on cost. Why similar offerings don’t cost the same Environment–Not all clouds are equal, even if they look alike up front. Multi-tenant, ­single-tenant and dedicated server clouds all perform differently. Pricing–Not all providers offer pay-for- what-you-need pricing, and upgrades like ­current-generation processors and permanent storage might cost extra. Hidden costs–There may be unexpected charges for intra-cloud network traffic, or service and support. Contract conditions–Volume or term com- mitments can make it costly to move off of the provider’s cloud.
  6. 6. 6Cloud IT economics What you don’t know about TCO can hurt you Looking at workloads realistically “The ‘right’ cloud service isn’t always public cloud, or even virtualized cloud; the optimal solution may involve bare metal or dedicated servers, or even a private or hybrid environment.” – Frost & Sullivan, The Truth About Cloud Price-Performance3 Leveling the playing field: cost in context To make cost comparisons more meaningful, IBM has conducted extensive analyses of cloud configurations from different providers based on the real- world scenarios and business conditions enterprises are likely to encounter. The findings, verified by leading analyst firm Frost & Sullivan, are a comparison of price-performance in context rather than straight pricing. What’s revealing about these tests is the effect of factors like choice of cloud environment and workload requirements on cost. The results show that “apples to apples” comparisons don’t necessarily yield an accurate view of cost, high- lighting the need to assess the cost of ownership for each workload individually. Compare the most meaningful measures Analyzing typical scenarios can be a useful starting point, but to get a solid grasp of TCO it’s important to understand the exact characteristics of your specific workload. Web applications Compute-intensive, customer-facing applications that require rapid response, throughput and scalability. What to look at • How many user requests are processed per second on average? • Do alternative environments deliver better price-performance? Analytics Storage-intensive, traditional business analytics and innovative cognitive applications. What to look at • How many input-output queries per hour can the cloud handle? • How costly is storage? Network-intensive workloads Inter-application messaging and data localization that require data to be moved cloud-to-cloud, cloud to on-premises systems and from one data center to another. What to look at • How much cost does a messaging-intensive workload add? • How cost-efficient is the cloud at moving data and workloads? Hosted private cloud Moving workloads from on-premises to consolidated cloud environments with speed and efficiency. What to compare How much does it cost to migrate a virtual machine to the cloud?
  7. 7. 7Cloud IT economics What you don’t know about TCO can hurt you TCO in the real world: Compute-intensive cloud application workloads Cloud-based applications like those for the Web, mobile and the Internet of Things are compute-­ intensive, demanding a cloud with flexibility and raw performance to deliver the experiences custom- ers expect. It’s about being able to quickly deliver and manage applications that meet the needs of the business as enterprises continuously develop applications in a mixed environment. Some application workloads require the rapid scal- ability and provisioning of virtualized infrastructure, while others will achieve better price-performance in a non-virtualized bare metal environment where the enterprise has greater control. This places a premium on the ability to choose the environment best suited to each, and easily shift among them. The comparison: Environment makes a difference IBM benchmarked cloud-based application workloads against a pair of leading providers in two ways. One set of tests was run in a fully virtualized environment, using the most nearly comparable configuration from each provider. Another was run using the IBM SoftLayer® bare metal (non-­virtualized) cloud. One competitor’s virtualized offering was very close to IBM SoftLayer: a ­single-tenant virtualized cloud using the same generation of processors. However, the other provider offers only multi-tenant cloud, and neither competitor offers the additional performance and control of bare metal servers. For compared workload and cloud environments, IBM SoftLayer is faster, lower cost, and has better price-performance IBM SoftLayer virtualized vs. Provider A 23%faster performance with IBM 25%lower price with IBM (3 yr. total) 1.6xbetter price-performance with IBM IBM SoftLayer, virtualized vs. Provider B 32%faster performance with IBM 1.2xbetter price-performance with IBM IBM SoftLayer bare metal vs. Provider A 35%faster performance with IBM 47%lower price with IBM (3 yr. total) 2.5xbetter price-performance with IBM IBM SoftLayer bare metal vs. Provider B 44%faster performance with IBM 20%lower price with IBM (3 yr. total) 1.8xbetter price-performance with IBM Based on an IBM internal study of a basic web application workload. Customer applications, differences in the stack deployed, data center locations and options, and other systems variations or testing conditions may produce different results. Pricing based on published US list prices available for IBM and competitor data center location specified as of 3/21/2016 and calculated by projecting costs measured over a 3 year TCA period. Costs include compute, network, storage, software, data transfer, and support charges (and excludes labor). Available options and pricing vary by data center location. Option for non-virtualized servers not available in competitor environment.
  8. 8. 8Cloud IT economics What you don’t know about TCO can hurt you The implications for TCO The analysis results show the real benefit of the choices that only IBM SoftLayer offers. The processing overhead of virtualization and proprietary platforms has a marked impact on performance. That can make it more difficult to deliver the compelling experiences that customers demand. There were also additional charges that added to the total cost of ownership for competing cloud providers. Higher-cost, production-capable VMs were required to match IBM SoftLayer, and there were additional costs such as software licensing, data transfer and technical support. All of these added dramatically to the total cost–and none are reflected in the competitors’ basic price quotes. The IBM advantage for cloud application workloads Business need What should the cloud provide? How IBM delivers Key benefits can include Stable, consistent high performance with lower operating costs Choice of environment, with pricing by usage or by the hour and no upcharges No fixed, predefined configurations in IBM SoftLayer; options like IBM POWER® and IBM z SystemsTM Match cloud capabilities with workload requirements for optimal price-performance Continuous development and delivery Flexible tools that allow the enterprise to choose its own course Automated, orchestrated deployment with IBM UrbanCodeTM Deploy Reduced time to market, increased productivity that lowers cost Rapid deployment and scale Easy workload and data portability Seamless integration of development across public, private and dedicated clouds with IBM Bluemix® Local Business agility, responsiveness and optimized cost Innovation Integration with legacy and external systems, data and services Robust IBM Bluemix service catalog and open APIs, plus IBM Cloud Managed Services that bring new services to market up to 75% faster6 Business agility and improved customer experiences Saving time and money by deploying in the cloud Amica reduces software deployment times by 95-98 percent. IBM UrbanCode Deploy helps automate software release processes.4 Learn more > Coca-Cola Enterprises Inc.: Moving to the cloud lowers IT costs and brings customer engagement programs to market faster.5 Learn more >
  9. 9. 9Cloud IT economics What you don’t know about TCO can hurt you 120,000 100,000 60,000 80,000 40,000 20,000 0 16KIOPS Provider A, block storage, 40K committed IOPS 1.6TB (10 x 160GB x 4000 IOPS RAID0) SoftLayer, bare metal internal SSD 1.6TB (8 x 400GB SSD RAID10) 16K_SeqRead 112,419 29,572 IBM SoftLayer 3.8xthe storage performance 3.0xlower price vs. Provider A for compared workload and environment. Increasing the value of data: Storage-intensive analytics workloads The revolution in analytics and cognitive business solutions is driving growth in cloud adoption, as enterprises seek to leverage data beyond traditional busi- ness intelligence. Data has become a key resource, enabling richer customer experiences and powering new, innovative business models through new tech- nologies like IBM Watson. Not only can analytics help to create better customer experiences, they can optimize the use of the cloud itself by monitoring usage patterns and enabling a flexible infrastructure that self-adjusts as needed. Analytic and cognitive workloads require speed and low latency while support- ing many concurrent users. This places the emphasis on storage performance and low processing overhead, so that rated speeds can be achieved in the face of tens or even hundreds of thousands of requests per second. The comparison: Analytics relies on storage throughput In the analytics realm, provisioning for high input-output performance is the dominant cost driver. IBM tested a mix of complex and intermediate business intelligence reporting workloads against two industry leading cloud providers, using configurations optimized for reporting throughput. The IBM SoftLayer test was run in a bare-metal environment for best price-­performance. Since neither competitor offers bare metal, the closest con- figuration was used with upgrades as needed to deliver maximum throughput.Test results obtained using an industry standard file system benchmarking tool. Competitor cloud configuration provisioned for I/O bandwidth of 40,000 IOPS. Results obtained under controlled conditions testing resources of a publicly available cloud infrastructure. Customer applications, differences in the stack deployed, differences in data center locations and options, and other systems variations or testing conditions may produce different results. For compared workload and cloud environments, IBM SoftLayer bare metal delivers higher throughput with less cost IBM SoftLayer bare metal vs. Provider A 1.9xmore throughput per processor with IBM 3.0xlower price with IBM (3 yr. total) 3.2xbetter price-performance with IBM US list prices available for IBM and competitor data center location specified as of 3/21/2016 and calculated by projecting costs measured over a 3 year TCA period, and include compute, network, storage, and support charges (excludes labor, DB2 software license costs (identical in both environments), and cloud provider data transfer charges.) Available options and pricing vary by data center location. Option for non-virtualized servers not available in competitor environment. IBM internal study of an analytics workload consisting of reports scanning all or portions of a 1TB denormalized star-schema database. Competitor Cloud configuration provisioned for I/O bandwidth of 40,000 IOPS. Results obtained under controlled conditions using publicly available cloud infrastructure. Customer applications, differences in the stack deployed, differences in data center locations and options, and other variations may produce different results. Pricing based on published
  10. 10. 10Cloud IT economics What you don’t know about TCO can hurt you The implications for TCO With some cloud providers, provisioning for high IOPS performance can make costs skyrocket. Because of virtualization overhead and throttling by the provider, standard storage offerings may exhibit high latency and be unable to deliver their rated speed. The alternative is to opt for upgraded storage at a far higher cost. Even basic storage costs are not always readily apparent. A provider’s virtual machines may include local ­storage–a seeming cost advantage. However, that storage is temporary. Those “ephemeral” disks are erased each time the virtual machine is shut down, restarted, moved or resized. With some providers, permanent block storage must be purchased separately, and is available only in fixed disk sizes–leading the enterprise to potentially buy more than it needs. The IBM advantage for analytics workloads Business need What should the cloud provide? How IBM delivers Key benefits can include Enhanced customer experiences and business model innovation Access to open APIs that build predictive analytics, business intelligence and cognition into the cloud Extensive service catalog including IBM WatsonTM technology and IBM Bluemix- integrated services Differentiated offerings that increase competitiveness and business agility Actionable business and customer insights Ready access to data and analytics Robust analytic solutions for marketing, finance, risk management and sales performance, fully integrated with the cloud Accelerated business results and optimized operations Reduced costs for storage-intensive workloads Consistent, high-performance, cost-effective storage Massively scalable IBM CleverSafe® object-oriented storage and IBM SoftLayer bare metal deployments that optimize infrastructure resources High throughput and data portability with lower storage costs Bringing cognition to the cloud To see how Whirlpool Corporation is applying IBM Watson Services, including cognitive analytics.7 Learn more > Alpha Modus, in conjunction with IBM Bluemix, is succeeding in making sense of–and shaking up–the entire investment management industry.8 Learn more >
  11. 11. 11Cloud IT economics What you don’t know about TCO can hurt you Moving data: Network-intensive workloads By definition, cloud strategies depend heavily on network performance. Data is in constant motion, whether as part of application messaging traffic, work- load migration, or data transfer from one data center location to another. Fast, reliable network connections unlock value by enabling different systems and applications to operate seamlessly, and enterprise data to be extended to the cloud. The priority with these network-centric workloads should be to keep the cost of moving data as low as possible. As cloud strategies evolve, the need for high network throughput is increasing. Cloud-based applications rely on network speed to perform well. Shortened development cycles require workloads to be shifted rapidly, and often. There is also the need to localize data, as security concerns and data sovereignty laws–regulations mandating where data and workloads are physically housed– become more stringent. Connecting data and applications to transform the business For compared workload and cloud environments, IBM SoftLayer costs less, yields faster messaging IBM SoftLayer bare metal vs. Provider B Up to 7xfaster performance with IBM Up to 11xbetter price-performance with IBM (3 yr. total) IBM SoftLayer bare metal vs. Provider A 36%faster performance with IBM 2.4xbetter price-performance with IBM (3 yr. total) Based on an IBM internal study of a message passing workload. Results obtained under controlled conditions using a publicly available cloud infrastructure. Customer applications, differences in the stack deployed, differences in data center locations and options, and other variations may produce different results. Pricing based on published US list prices available for SoftLayer Washington DC and competitors’ US East data center locations as of 3/21/2016 and calculated by projecting costs measured over a 3 year TCA period that includes compute, network, storage, and support charges (and excludes client labor costs and cloud provider data transfer charges.) Available options and pricing vary by data center location. Option for non-virtualized servers not available in competitor environment. IBM Cloud and consulting services help Shop Direct react to shifting customer demands in a mobile connected, cloud enabled world.9 Learn more > Apptimate migrated its solution to the SoftLayer platform, capitalizing on the global network of data centers to facilitate growth and adhere to national data security laws.10 Learn more >
  12. 12. 12Cloud IT economics What you don’t know about TCO can hurt you 80,000 60,000 40,000 20,000 0 Messagespersecond Provider B Haswell vCPU Provider B Sandy Bridge vCPU 9,514 12,632 25 20 15 10 5 0 Dollarspermessagepersecond Provider B Haswell vCPU $20.87 Performance for the workload and environments compared Higher is better Provider A Ivy Bridge vCPU 12kB non-persistent messaging tests 51,995 Cost for the workload and environments compared Lower is better Provider A Ivy Bridge: 32 vCPU, 10 Gbps Provider B Sandy Bridge: 16 vCPU Provider B Haswell: 16 vCPUIBM SoftLayer Ivy Bridge: Bare metal, 12 cores, 10 Gbps SoftLayer Ivy Bridge bare metal Provider B Sandy Bridge vCPU Provider A Ivy Bridge vCPU $1.85 $19.39 $4.44 SoftLayer Ivy Bridge bare metal 70,925 The comparison: Virtualization has a significant impact IBM analyzed messaging performance against two leading cloud providers by generating message threads with a “sender” application, passing them through a messaging server, and consuming them with a “receiver” application. Traffic was increased until the message rate couldn’t go any higher. The processing overhead caused by virtualization and proprietary software stacks played an important role, with IBM SoftLayer bare metal delivering far higher performance at a small fraction of the cost relative to the competitors’ virtualized clouds. The choice of processor in the competitor’s clouds also had an impact, with upgraded hardware delivering better performance but at a much higher cost per message. Based on an IBM internal study of a message passing workload. Results obtained under controlled conditions using a publicly available cloud infrastructure. Customer applications, differences in the stack deployed, differences in data center locations and options, and other variations may produce different results. Pricing based on published US list prices available for SoftLayer Washington DC and competitors’ US East data center locations as of 3/21/2016 and calculated by projecting costs measured over a 3 year TCA period that includes compute, network, storage, and support charges (and excludes client labor costs and cloud provider data transfer charges.) Available options and pricing vary by data center location. Option for non-virtualized servers not available in competitor environment.
  13. 13. 13Cloud IT economics What you don’t know about TCO can hurt you The implications for TCO For applications that generate heavy network traffic, messaging server throughput can be the single most significant limiting factor on performance. As network traffic backs up, application servers may sit idle and costs rise because the enterprise must invest in additional capacity to compensate. Network capacity is not the only cost driver associated with moving data. Most cloud providers encourage their clients to keep data and workloads in the pro- vider’s cloud through policies that make it easy and inexpensive to move data to the cloud, but costly to shift it once it’s there. The IBM advantage for network-intensive workloads Business need What should the cloud provide? How IBM delivers Key benefits can include Application performance High sustained messaging throughput IBM SoftLayer bare metal servers and high-speed networking, with pricing that allows the enterprise to buy only what’s needed Improved customer experiences and productivity Data localization High-speed, low-cost, secure data transfer, large number of data center locations Zero transfer costs between IBM SoftLayer data centers, worldwide data center presence with IBM SoftLayer and IBM Cloud Managed ServicesTM Customer satisfaction, enhanced compliance, reduced business risk Data portability Network throughput, simplicity, freedom from barriers to migration IBM Aspera® ’s dedicated protocol that delivers transfer speeds up to hundreds of times faster than FTP or HTTP, regardless of file size Faster speed to market, increased business agility, enhanced productivity Creation of innovative services Ability to connect applications and data in a secure, scalable way IBM Message Connect seamlessly links applications and services, while IBM Integration Bus connects processes across systems Better customer experiences, business agility and speed to market Providers may also charge extra to move data to a different data center, especially one in another region. These transfer charges can become signifi- cant if the enterprise needs to move large amounts of data to specific locations in order to meet regulatory compliance or customer mandates.
  14. 14. 14Cloud IT economics What you don’t know about TCO can hurt you Gaining business agility: Moving workloads to the cloud “When server resources are shared, there is increased opportunity for data to become contaminated or lost.” – Frost & Sullivan, All Clouds Are Not Created Equal11 Private clouds have an important place in today’s IT landscape because they offer greater visibility, control and security. Some enterprises elect to keep sensitive workloads such as development on-premises to ensure all three. Today, however, providers like IBM offer hosted private clouds that combine these advantages with the cost benefits of infrastructure-as-a-service. That can enhance business agility, because the private cloud can be fully inte- grated with existing IT infrastructure, on-premises and off-premises clouds in a hybrid environment. An increasing number of enterprises are deploying hybrid cloud environments, enabling them to allocate workloads according to the characteristics of each. Often, an enterprise will develop on-premises or in a private cloud, and then migrate the workload to the public cloud for deployment. This makes workload portability, complexity and the cost of migration key considerations. The comparison: Simplicity and control tip the balance IBM assessed the cost of ownership by consolidating 38 virtual machines running Web applications, migrating them from an on-premises environ- ment to the cloud. IBM SoftLayer costs were based on a hosted, bare-metal private cloud. Neither of the two competitors offers a hosted private cloud option, so pricing for those offerings was based on a fully virtualized public cloud infrastructure. For compared workload and cloud environments, IBM SoftLayer lowers migration costs IBM SoftLayer bare metal vs. Provider B 40%lower cost with IBM (3 yr. total) IBM SoftLayer bare metal vs. Provider A 44%lower cost with IBM (3 yr. total) Based on an IBM internal study of a web application consolidation scenario. Results obtained under controlled conditions using publicly available cloud infrastructure. Customer applications, differences in the stack deployed, differences in data center locations and options, and other systems variations or testing conditions may produce different results. Pricing based on published US list prices available for IBM and competitor data center location specified as of 3/21/2016 and calculated by projecting costs measured over a fixed testing period to a 3 year TCA period. Costs include compute, storage, network, software, data transfer, and support charges (and excludes labor). Available options and pricing vary by data center location. Option for non-virtualized servers not available in competitor environment.
  15. 15. 15Cloud IT economics What you don’t know about TCO can hurt you The indirect costs of moving virtual machines Consider other elements of cost beyond compute and storage Because bare metal offers higher performance then vCPUs, less software must be licensed. Less software, less cost. Comparable 8 processor single-tenant Linux systems 3 year total cost line item IBM Softlayer, bare metal (two servers) IBM SoftLayer, private VM (two single-tenant VMs) Provider A, 3-year prepay (two single-tenant VMs) Compute + storage $51,840 $34,746 $89,300 Technical support $0 $0 $8,995 (Business) Data transfer (500GB per month per server) $0 $1,620 $3,237 Software cost (including S&S) $49,686 $141,960 $141,960 Total 3 year cost with software $101,526 $178,326 $243,492 Total 3 year cost excluding software $51,840 $36,366 $101,532 3 year total cost projection includes comparable compute, storage, network, software, data transfer, and support charges; pricing based on SoftLayer monthly and competitor’s 3 year all upfront reserved instance published US list prices as of 3/21/2016. Options and pricing vary by data center location. Competitor single-tenant pricing includes dedicated per region fees. Options and pricing based on configurations in SoftLayer Washington DC and competitor’s US-East data center locations. Data transfer charges assume 500GB transfer to internet per month per server for two servers for 3 years. Migrating to a global cloud to expand the reach of the enterprise To offer more agility and speed, Kasbah System Software relies on high value IBM SoftLayer cloud capabilities to host its Genius University Management System.12 Learn more > __ Hypervisor conversion __ Complexity due to separate manage- ment interfaces __ Need to learn new tools __ Reduced flexibility and control __ Speed of provisioning __ Risk exposure in the public cloud
  16. 16. 16Cloud IT economics What you don’t know about TCO can hurt you The implications for TCO The way cloud providers price their cloud infrastructure has a major impact on the cost to consolidate workloads. Charges are typically for fixed vir- tual machine (VM) configurations rather than by utilization of the underlying hardware, and the enterprise pays for capacity whether it is used or not. IBM SoftLayer bare metal allows enterprises to achieve higher VM density on a given physical server by “stacking” workloads, opening the door to significant savings. Indirect costs also come into play. Most cloud providers limit the choice of computing architecture and hypervisor, and in some cases the management platform. Each virtual machine that gets migrated from an on-premises data center to the cloud may require conversion to a different hypervisor, and might need different tools and skills for management. This adds complexity and with it, cost. The IBM advantage for consolidating workloads Business need What should the cloud provide? How IBM delivers Key benefits can include Security, visibility and control Physical, platform and network security, consistent management tools Dedicated private cloud infrastructure with choice of hardware including IBM POWER, IBM z Systems, with visibility down to the machine serial number Reduced risk, enhanced productivity, improved business agility, lower cost through higher VM density Efficient workload migration Ability to extend existing tools, processes and skills to the cloud Open standards-based IBM Bluemix platform, with IBM SoftLayer support for all hypervisors Consistent management interfaces, lower conversion costs, less complexity, no provider lock-in Availability and data protection Ability to back up critical data and recover workloads in a timeframe that meets business requirements Disaster Recovery as a Service and Backup as a Service optimized for cloud workloads Reduces risk of downtime and data loss
  17. 17. 17Cloud IT economics What you don’t know about TCO can hurt you To choose wisely, look at the big picture “ When the enterprise finds a provider that has expertise across technology, infrastructure, professional and managed services, it can make a selection that is more likely to deliver maximum business value with optimal ROI.” – Frost & Sullivan, Using Hybrid Cloud Strategy to Drive Business Value13 On the surface, cloud seems so simple and affordable. But as has been demonstrated in this guide, there’s more to it than low-cost virtual infrastruc- ture. The initial price is only the starting point. The total cost depends on everything from hardware price-performance to cloud architecture, pricing models, software licensing, technical support, contracts and “soft” cost drivers like platform complexity and provider lock-in. The IBM approach is markedly different because it takes these additional factors into account. While other cloud providers are working to limit and com- moditize cloud services in pursuit of low initial prices, IBM adds real-world value through openness and choice. When total cost of ownership is viewed through that lens, the IBM advantage becomes clear. For today’s enterprises, that distinct approach matters because business priori- ties are fluid. As cloud strategies driven by cost reduction give way to the use of cloud for strategic advantage, enterprises are adopting integrated hybrid envi- ronments that combine public and private clouds with existing IT. Productivity, business agility, flexibility and ease of integration are as important as low cost. These are what IBM helps to achieve, through a combination of expertise, tech- nology and services unmatched by any other cloud provider. Base your business case on the real economics of IT Which cloud is best? The answer depends on your workloads, IT requirements and business strategy. There are questions of which workloads to place in the cloud, and which environment best suits them. It’s a choice that balances IT economics against business agility and workload optimization. The IBM Eagle Team IT Economics Practice can run a no-cost analysis using your own data and business assumptions to help you make the best decision. Learn more > IBM Global Technology Services can help you architect an infrastructure tuned for cloud workloads, to optimize your cloud ROI. Learn more >
  18. 18. 18Cloud IT economics What you don’t know about TCO can hurt you The IBM cloud aligns with what enterprises are looking for Assessing cloud value is a balancing act, pitting what the solution enables the enterprise to accomplish against the required investment. The IBM cloud can help achieve desired business outcomes quickly, at low cost–the right combi- nation of capabilities, performance and economics. Capabilities Innovation–Leverage open communities and cognitive computing to maximize opportunity Speed–Take advantage of hybrid environments to change only what’s needed and get to value faster Insight–Combine enterprise data with new sources of data to get the best outcomes Security–Minimize exposure of sensitive data Performance Flexibility–Position workloads to best deliver on business objectives Powerful computing–Access leading-edge technology without major capital investment Transformation–Build a fast, scalable foundation for new, cognitive business models Economics Choice–Choose the mix of technologies and deployment models that deliver the best price-performance Cost–Optimize IT spending for maximum ROI Visibility and control–Manage infrastructure and IT services more efficiently
  19. 19. The future of cloud is hybrid. The future of business is cognitive. IBM is making it affordable. Through ongoing investments in open technologies and infrastructure, IBM is laying the foundation of a new kind of cloud that delivers better capa- bilities and higher performance along with improved economics. Reducing total cost of ownership is ­essential–but so is enabling competitive advan- tage. The IBM cloud is designed to do both. IBM is enabling business innovation and the cognitive enterprise because these are what will differentiate tomorrow’s businesses. Along the way, there’s an understanding of business reality, and that there’s a balance to be struck between investment and outcome. That’s why IBM focuses on the total picture: those costs and capabilities that matter most to the enterprise. The IBM cloud: Greater business agility. Increased competitiveness. Less cost. Choice with consistency Put the right workload in the right place, at the right time–because where and how you develop and deploy workloads determines price-performance. Hybrid integration Unlock existing data and applications to build on what you have today, changing only what you need to– because less complexity means lower costs. DevOps productivity Develop, experiment and iterate at speed–because business agility enhances cloud ROI. Powerful, accessible data and analytics Extract deeper insight to understand your business and get closer to the customer–because smarter decisions lead to greater efficiency. Cognitive solutions Build understanding and learning into decisions and interactions–because that’s what’s going to drive competitiveness in the age of digital business.
  20. 20. © Copyright IBM Corporation 2016 IBM Corporation New Orchard Road Armonk, NY 10504 Produced in the United States of America June 2016 IBM, the IBM logo, ibm.com, Bluemix, IBM Cloud Managed Services, IBM UrbanCode, IBM Watson, IBM z Systems and POWER are trademarks of International Business Machines Corp., registered in many jurisdictions worldwide. Other product and service names might be trademarks of IBM or other companies. A current list of IBM trademarks is available on the Web at “Copyright and trademark information” at www.ibm.com/legal/copytrade.shtml Cleversafe is a registered trademark of Cleversafe, Inc., an IBM Company. SoftLayer is a registered trademark of SoftLayer, Inc., an IBM Company. This document is current as of the initial date of publication and may be changed by IBM at any time. Not all offerings are available in every country in which IBM operates. The performance data and client examples cited are presented for illustrative purposes only. Actual performance results may vary depending on specific configurations and operating conditions. It is the user’s responsibility to evaluate and verify the operation of any other products or programs with IBM products and programs. THE INFORMATION IN THIS DOCUMENT IS PROVIDED “AS IS” WITHOUT ANY WARRANTY, EXPRESS OR IMPLIED, INCLUDING WITHOUT ANY WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND ANY WARRANTY OR CONDITION OF NON-INFRINGEMENT. IBM products are warranted according to the terms and conditions of the agreements under which they are provided. The client is responsible for ensuring compliance with laws and regulations applicable to it. IBM does not provide legal advice or represent or warrant that its services or products will ensure that the client is in compliance with any law or regulation. Statements regarding IBM’s future direction and intent are subject to change or withdrawal without notice, and represent goals and objectives only. Please recycle KUJ12454-USEN-02 1 The Truth about Cloud Price-Performance: How Misperceptions about Service Costs Can Derail Your Cloud Strategy. Frost & Sullivan. August 2015. https://www-01.ibm.com/marketing/iwm/dre/signup?- source=ibm-cloud-weborganic&S_PKG=ov38505&dynform=20109 2 Ibid. 3 Ibid. 4 IBM case study. https://www-03.ibm.com/software/ businesscasestudies?synkey=F504292V95613B10 5 IBM case study. http://www-03.ibm.com/software/businesscasestudies/ za/en/corp?synkey=V936714O34270N26 6 Based on documented IBM client results. 7 IBM press release. http://www-03.ibm.com/press/us/en/pressre- lease/48762.wss 8 IBM case study. https://developer.ibm.com/bluemix/2015/11/03/ alpha-modus-reinvents-investment-with-bluemix/ 9 IBM press release. http://www-03.ibm.com/press/uk/en/pressre- lease/48890.wss 10 IBM case study. http://www-03.ibm.com/software/businesscasestudies/ bn/en/corp?synkey=C599912P48348O12 11 All Clouds Are Not Created Equal: A Logical Approach to Cloud Adoption in Your Company. Frost & Sullivan Stratecast. February 2014. http://www. ibm.com/services/us/en/cloud-enterprise/att/pdf/frost-sullivan-wp.pdf 12 IBM press release. https://www-03.ibm.com/press/us/en/pressre- lease/42780.wss 13 Using Hybrid Cloud Strategy to Drive Business Value. Frost & Sullivan Executive Brief. Frost & Sullivan. 2015.

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